POWER: Small businesses band to cut rates

Thursday

May 31, 2007 at 12:01 AMMay 31, 2007 at 11:32 PM

SPRINGFIELD -- Legislative action — or inaction — on an electricity rate freeze no longer matters quite so much to more than 700 small businesses in central Illinois that decided to find an alternative source of power.

Tim Landis

By TIM LANDIS

BUSINESS EDITOR

SPRINGFIELD -- Legislative action — or inaction — on an electricity rate freeze no longer matters quite so much to more than 700 small businesses in central Illinois that decided to find an alternative source of power.

The rate-freeze debate has, however, caused some uncertainty for chambers of commerce in Springfield, Chatham, Taylorville and Lincoln.

Chambers in Decatur, Peoria and Champaign spent much of the spring signing up small businesses for a late-April power auction intended to drive down costs by buying in bulk on the wholesale market.

Savings in the first year alone are expected to total $3.3 million compared to Ameren utility rates, Randy Prince, president of the Greater Decatur Chamber of Commerce, said Thursday.

The Decatur chamber was the lead organization for the auction.

Prince added that savings are expected to be even greater the second and third years based on futures-market projections for the price of electricity. The rates for the businesses that signed up take effect with June power bills.

“We really feel good about the deal we got. Our goal was long-term stability for power costs,” said Prince.

The first round was open to businesses with power bills of at least $500 a month. A second sign-up scheduled to end today lowered the threshold to $200 a month.

Prince said 95 percent of businesses that paid $300 per location to join the auction went on to sign three-year contracts at a rate of 6.85 cents per kilowatt hour compared to an Ameren rate that worked out to 7.5 cents per kilowatt hour for most of the companies. Ameren utilities in Illinois include AmerenIP of Decatur, AmerenCIPS in Springfield and AmerenCILCO in Peoria.

It was the largest such auction to date for CQI Associates, the Maryland-based energy and consulting firm that organized the wholesale power purchase on behalf of the Decatur, Peoria and Champaign chambers.

CQI has conducted more than 40 auctions for 3,100 locations nationwide since 1999, according to the company Web site.

Managing partner Richard Anderson said prices on wholesale power markets shot up just in the few weeks since the auction, adding that current rates are even higher than the rates paid to Ameren.

“We went with the most ideal time, the last minute, the last hour. Since that time, rates have continued to go up. If we were looking at this today, we could not do an auction (in Illinois),” said Anderson, who added the wholesale power markets are driven by a combination of “fear and greed.”

The debate in the Illinois General Assembly on whether to restore a 10-year rate freeze that expired Jan. 1 also cast doubt on the auction, according to Anderson. But he said the chambers ultimately decided not to wait on the legislature.

“Illinois on a political basis with deregulation is not very different from other states. Everybody has struggled, everybody has fits and starts,” he said.

Chambers in Springfield, Chatham, Taylorville and Lincoln have organized a series of informational meetings in cooperation with CQI Associates this month on the possibility of a similar power auction on behalf of their members.

Nat Seiz, manager of business retention and expansion for the Greater Springfield Chamber of Commerce, said the schedule could change, depending on the outcome of the rate-freeze debate in the legislature.

“If it (a rate freeze) does go through, it’s not certain there’ll be any benefit,” said Seiz.

Seiz said about 90 percent of Springfield chamber members buy power from municipally owned City Water, Light and Power and are not affected by the rate-freeze issue. But he noted that Ameren services rural areas of Sangamon County.

“We wanted to give them the opportunity of buying in bulk,” he said.

Meetings for the Springfield and Chatham chambers are free and open to the public and will be held at Lincoln Land Community College, including 4 p.m. Wednesday, June 13, and Thursday, June 14, at the Trutter Center, and 7:30 a.m. Tuesday, June 26, at the Workforce Center.